Correlation Between U Media and Alpha Networks

Can any of the company-specific risk be diversified away by investing in both U Media and Alpha Networks at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining U Media and Alpha Networks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between U Media Communications and Alpha Networks, you can compare the effects of market volatilities on U Media and Alpha Networks and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in U Media with a short position of Alpha Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Media and Alpha Networks.

Diversification Opportunities for U Media and Alpha Networks

0.25

Correlation Coefficient

U Media  Alpha Networks

Modest diversification

The 3 months correlation between 6470 and Alpha is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and Alpha Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Networks and U Media is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on U Media Communications are associated (or correlated) with Alpha Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Networks has no effect on the direction of U Media i.e., U Media and Alpha Networks go up and down completely randomly.

Pair Corralation between U Media and Alpha Networks

Assuming the 90 days trading horizon U Media Communications is expected to generate 1.18 times more return on investment than Alpha Networks. However, U Media is 1.18 times more volatile than Alpha Networks. It trades about 0.03 of its potential returns per unit of risk. Alpha Networks is currently generating about 0.02 per unit of risk. If you would invest  5,230  in U Media Communications on September 13, 2024 and sell it today you would earn a total of  160.00  from holding U Media Communications or generate 3.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

U Media Communications  vs.  Alpha Networks

U Media Communications

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in U Media Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, U Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Alpha Networks

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Networks are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Alpha Networks is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with U Media and Alpha Networks

The main advantage of trading using opposite U Media and Alpha Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Media position performs unexpectedly, Alpha Networks can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Alpha Networks will offset losses from the drop in Alpha Networks' long position.

The idea behind U Media Communications and Alpha Networks pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.